20240206-招银国际-九毛九-09922.HK-Introduced_the_franchise_model_for_Tai_Er_10页_727kb

Jiumaojiu (9922 HK) Company Update Summary

• Rating and Target Price: Maintain BUY rating, but cut target price from HK$15.46 to HK$7.05, reflecting a 56.7% downside, due to stable same-store sales (SSS) recovery but weak operating numbers despite the introduction of the franchise model for Tai Er.

• Key Developments: Tai Er franchise model launched in Feb 2024, covering Xinjiang, Xizang, Taiwan region, Australia, New Zealand, and China's transportation hubs. Shanwaimian cooperative model starts in Feb 2025. Positives include growth potential in hubs with estimated 250+ airports and 5,000+ railway stations, but cautious on market penetration; net profit margin could be 1-2% incremental if 20 stores opened annually.

• Challenges: H2 2023E performance weak (NP att. margin ~5.1%), due to youth unemployment, price deflation, operating leverage issues, and high franchisee requirements. Cautious outlook on the catering sector overall.

• Financial Projections: Downgrade FY23-25E profit forecasts (down 28-43% YoY in some years) due to macroeconomic weakness and stable SSS recovery; sales growth slower than expected in key brands. EBIT margins improved in some periods but net profit margins remain under pressure.

• Valuation: Current P/E 13x FY24E and 15x FY23E, valuation cheap with potential for re-rating if operations improve in FY24-25E. Key assumptions include modest store expansion and recovery in key metrics like seat turnover.

• Recommendations: Buy on valuation, monitor closely for operational turnaround; risks include slow franchise adoption and external economic factors.